Bait And Switch

A certain lawyer or group of lawyers is trolling Iowa farmers for a class action lawsuit against a seed/biotech company. They are alleging that this company released corn seed into the American seed corn market that wasn’t approved for export to China. When traces of the offending corn turned up in samples taken from incoming American feed grain shipments at the Chinese ports the Chinese officials refused entry of the shipments into the country. The trolls further contend that this refusal resulted in a collapsing market price for corn in America. They are suing for a substantial amount of money.

But …….

Given the fact that it is an established practice of Chinese importers to cancel sales after markets decline only to buy new contracts at the new lower price any and all actions made by these same offices are suspect at best. Oftentimes these Chinese cancellations are announced while markets are open. Markets dominated by high frequency trading algorithmic computers programed to react to any and all market associated “headlines” read off of newswires services at lightning fast reaction speeds. Helping drive prices further in the desired direction.

China is sitting on six billion bushels of their own corn. Roughly half of what we can produce annually on a consistent basis. They are one of America’s newest and smallest corn clients. They are where soybeans originated. They learned long ago how hard on the soil growing soybeans are. Add in the fact that corn yields three to four times as many tons per acre and you have a good argument to grow corn at home and import the beans. Pound for pound you’re importing four times as many acres on the same ship. Whether they ever will become a major customer for America’s corn farmer is doubtful for these very basic economic reasons. I think markets are astute enough to keep that in account.

The main reason the feed grain markets have collapsed is none other than our very own EPA’s ethanol debacle. When Congress orders 18 billion gallons of ethanol be produced and blended into the country’s transportation fuels the market sits straight up and takes note. When the market takes note every farmer in the world takes note, production is stimulated. When Alabama’s EPA director says it taint happening the markets also respond, in an equal and opposite direction. Trust me, farmers took note. Dropping Navigable from Congress’s Clean Water Act is not enough of a distraction to make producers forget what EPA’s ethanol debacle has done to feed grain markets.

But nice try.



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